Correlation Between Coca Cola and Bt Brands
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Bt Brands at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Coca Cola and Bt Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Coca Cola and Bt Brands, you can compare the effects of market volatilities on Coca Cola and Bt Brands and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Coca Cola with a short position of Bt Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Bt Brands.
Diversification Opportunities for Coca Cola and Bt Brands
Average diversification
The 3 months correlation between Coca and BTBD is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Bt Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bt Brands and Coca Cola is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on The Coca Cola are associated (or correlated) with Bt Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bt Brands has no effect on the direction of Coca Cola i.e., Coca Cola and Bt Brands go up and down completely randomly.
Pair Corralation between Coca Cola and Bt Brands
Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.2 times more return on investment than Bt Brands. However, The Coca Cola is 4.96 times less risky than Bt Brands. It trades about -0.06 of its potential returns per unit of risk. Bt Brands is currently generating about -0.06 per unit of risk. If you would invest 6,482 in The Coca Cola on September 1, 2024 and sell it today you would lose (74.00) from holding The Coca Cola or give up 1.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. Bt Brands
Performance |
| Timeline |
| Coca Cola |
| Bt Brands |
Coca Cola and Bt Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Bt Brands
The main advantage of trading using opposite Coca Cola and Bt Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Bt Brands can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Bt Brands will offset losses from the drop in Bt Brands' long position.| Coca Cola vs. Coca Cola Femsa SAB | Coca Cola vs. National Beverage Corp | Coca Cola vs. Embotelladora Andina SA |
| Bt Brands vs. Alsea SAB de | Bt Brands vs. Marstons PLC | Bt Brands vs. Bagger Daves Burger | Bt Brands vs. Marstons PLC |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Transaction History module to view history of all your transactions and understand their impact on performance.
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